franchising

• ITEM 1: The Franchisor, and any Parents, Predecessors, and Affiliates Every franchisor, predecessor, and affiliates deserves only to be scrutinized even in its smallest unit. All the information you will gather will help you to be successful in said business
• ITEM 2 : Business Experience If the franchisor has workers who already have a lot of experience in owning a business, it is only fitting that the franchise you buy also have experience in running it. This is one of the advantages of a company because if someone has experience in that business it will be easy for them to run the franchise that you have purchased
• ITEM 3 : Litigation Every business is required by the legal process of owning and operating it. If franchisee are buying a franchise, still carefully check the paperwork, background of said company so that you know if it is legal. Did it follow the rules and no law was broken? Franchisors should know the legal processes in this type of business because everything has to go through thorough examination and legal procedure
• ITEM 4 : Bankruptcy Bankruptcy is not easy to fight when it comes to businesses. When the franchisor notices that their potential client is about to go bankrupt, it will be a warning to them and they will have to decide whether they will take it or not
• ITEM 5 : Initial Fees Many initial fees are required to be paid before a franchisee can buy or build a franchise business such as rights and point of sale equipment called. “Nickel and dime” where they will lower your initial fees but in other respects will take other fees such as training fees where you will pay for training as well and to help them before opening
• ITEM 6 : Other Fees All your fees expenses must be documented and listed at least in the minimum fee. Find out if the money spent will be refunded in case you back out of a franchise agreement. Line items include a statement of the royalties, advertising fees, service fees, training fees, renewal fees, and other similar one-time or going chargers
• ITEM 7: Estimated Initial Investment Starting expenses opening a franchise, especially the first phase and the first three months of running a franchise should be outlined so that you can create a better business plan for your business. If you notice that you have to pay 50 percent, there may be a violation of the law. It is worth checking all the expenses of the said business
• ITEM 8 : Restriction on Sources of Products and Services It is only allowed to buy supplies, goods and equipment at those required by the franchisor or those stores approved by the franchisor
• ITEM 9 :Franchisee’s Obligations There is a franchise agreement that is signed before a franchise operates. It is listed down in the said agreement as well as the rules and regulations of the franchisor. The purpose of the table is to identify your principal obligations under the franchise agreement and other agreements
• Financing


  Challenges faced by those who franchise a business
• For example, the franchisor finances or offers financing

  Rare, usually only covers the expenses of the franchise business
• The franchisor finances or offers financing

  Has agreement and probabilities when it fails to pay the used finance that came from the franchisor
• When it fails to pay the used finance that came from the franchisor

  Termination of the franchise
• Terms of financing


  • Amount it will agree to finance
  • Interest rate
  • Length of the loan
• If the franchisor offers financing, it must disclose the terms of such financing
• ITEM 11 : Franchisor's Assistance, Advertising, Computer System, and Training • One of the more lengthy and important disclosure item. • Franchisor must disclose the services they provide before and after opening of the franchise • The services they provided are stated as a list • Most franchisors often require you to spend a certain amount or a percentage of your gross sales for local advertising • Money spent on local advertising is the best investment you can attract customers
• Exclusive territory


  An area of protection around a business in which the franchisee is the only business selling the franchised goods and services
• Protected territory


  Another term for exclusive territory
• Exclusive territory is provided or offered by the franchisor for the protection of the franchisee in his business
• No other franchise of the same business will build or operate at one location or in one place
• If the franchisor does not require a quota, it is possible to have a similar franchise in one place as long as it sells and earns appropriately
• The franchisee still has the right to continue the franchise even if it does not reach the said quota
• Trademark


  A trade name, trade marks, service marks, service name or logo type
• UPSTO (U.S Patent and Trademark Office)
• Types of Registers


  • Principal Register
  • Supplemental Register
• In the marketplace, a trademark protects a company’s brand identification
• When a trademark is registered, the owner gains exclusive rights to prevent others from using or abusing it in any way
• Trademark


  A source-identifier
• The mark may also provide a source of cash for the owner in the form of royalties derived from franchising or licensing the registered trademark for use by others
• ITEM 14 : Patents, Copyrights, and Proprietary Information • Determine any possible limitations of the right of the franchisor to use the patent • Examine any claims of proprietary right and confidential information designated by the franchisor
• ITEM 15: Obligation to Participate in the Actual Operation of the Franchise Business • Franchisees must personally participate in the operation of the franchise. • The successful franchisee is the one who manages their own business. • Every franchisee has their own obligations to participate in any operation of the franchise
• ITEM 16 : Restrictions on What the Franchisee May Sell • The franchisor will only require to sell goods and services that are part of the franchise business. There have been instances in which franchisees were limited to only one service. In one case, for example, a franchisee was limited to offering only oil-change service for automobiles. Franchisees of the system thought that the system should also offer general vehicle repair services since the oil-change business was not bringing in sufficient revenue
• Renewal, Termination, Transfer, and Dispute Resolution


  This section tells you when and how your franchise can be renewed or canceled and what your rights and constraints are when you have problems with your franchisor
• Consult your attorney if your registration state has franchise laws regulating franchise renewals and terminations
• A good franchise package should allow you to change legal forms of business organization
• Change legal forms of business organization

  • From a sole proprietorship to a partnership
  • From sole proprietorship to a corporation or limited liability business entity
• Minimum fee


  The lowest fee that can be charged for changing legal forms of business organization
• Public figures


  • Franchisor must disclose whether it uses a famous person to endorse the franchise
  • If so, it must disclose the compensation paid or promised to the person
  • The person’s involvement in management or control of the franchisor
  • The amount of the person’s involvement in management or control of the franchisor
  • Whether or not you can use the person in personal appearances or in advertising without prior written approval of the franchise
  • How frequently you can do
  • The cost of such use, if any
• Financial performance representation (FPR)


  Any representation, including any oral, written, or visual representation, to a prospective franchise, including a representation in the general media that states, expressly or by implications, a specific level or range of actual or potential sales, income, gross profits, or net profits
• Financial performance representation (FPR)


  Documents, charts, arithmetic calculations, mathematical formulas